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Income Tax Appellate Tribunal, DELHI BENCH ‘G’ : NEW DELHI
Before: SHRI N.K. SAINI & SHRI A.T. VARKEY
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘G’ : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER and SHRI A.T. VARKEY, JUDICIAL MEMBER ITA No.3937/Del./2010 (ASSESSMENT YEAR : 2005-06) Shri Shyam Sunder, vs. DCIT, Circle 39(1), 4194, Gali Asharam, 1st Floor, New Delhi. Pahari Dhiraj, Sadar Bazar, New Delhi (PAN : AOTPS9308E) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Salil Kapoor, Shri Sanat Kapoor & Shri Subham Rastogi, Advocates REVENUE BY : Shri Sujit Kumar, Senior DR Date of Hearing : 17.11.2015 Date of Pronouncement : 30.11.2015 O R D E R PER A.T. VARKEY, JUDICIAL MEMBER :
This appeal, at the instance of the assessee, is filed against the order of CIT (Appeals)-XXVIII, New Delhi dated 26.10.2009 for the assessment year 2005-06. 2. The only solitary ground taken by the assessee is against the confirmation of penalty of Rs.2,08,364/- imposed under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The assessee is an individual and Proprietor of M/ s. Rahul Textiles and trading of cloth and related items. A survey was conducted u/s 133A of the Act on 11.02.2005. As a result of survey, excess stock was found and the assessee surrendered the excess stock amounting to Rs.30,00,000/- for taxation. The AO recorded the statement of the assessee to this effect during the course of survey. But, while filing his return of income, the assessee offered and surrendered income of Rs.23,80,978/- with a note below the trading and profit & loss account as under :-
“This surrender of Rs.30,00,000/- was made on the basis of Trading A/c drawn on that date from the figures taken from the books of account of the assessee. However, later on, the assessee noticed that their accountant missed to enter 5 purchases bills of Rs.6,19,022/- which material had already been received by the assessee till 10.02.2005. Accordingly excess stock surrender amount becomes at Rs.23,80,978/- (3000000-619022) and the same has been duly accounted for in the final accounts of the assessee."
The AO made inquiries from the two parties in respect of which the assessee had claimed the purchases of Rs.6,19,022/ - which were found not entered in the books of account of the assessee at the time of survey. The AO observed that in one of the cases, interpolation / correction were found in the bill produced for verification. However, both the parties submitted that the payment in respect of sales made were received subsequently through cheques. The AO confronted the assessee with the above interpolation in the bills and the assessee vide letter dated 13.11.2007 surrendered the amount of Rs.6,19,022/- i.e. the value of purchase bills as income which was deducted from the surrendered income of Rs.30,00,000/- at the time of filing the return of income. Accordingly, the AO made the addition on account of surrendered income of Rs.6,19,022/-. Against this addition, the assessee did not file any appeal. The AO also directed to initiate penalty proceedings u/s 271(1)(c) of the Act.
3.1 In the penalty proceedings, the AO required the assessee to file his justification for non levy of penalty u/ s 271(1)(c) of the Act. The assessee filed reply vide letter dated 23-04-2008 . The AO, after considering the facts, was of the opinion that it was apparent that assessee had concealed the particulars of his income and furnished inaccurate particulars thereof and it was only after the interpolation / inquiring in one of the bills pointed out to him, the assessee surrendered the income and not on his own. He accordingly levied the minimum penalty @ 100% of Rs.2,08,364/- u/s 271(1)(c) of the Act.
3.2 Aggrieved, the assessee filed an appeal before the first appellate authority. The ld. CIT (A) confirmed the penalty by observing as under:-
“7. Considering the above, it is clear that in respect of the amount on which penalty has been imposed, there was no voluntary admission of income prior to detection by the A.O. Income on account of excess stock found during survey was admitted during survey but partly retracted subsequently by manipulating certain purchases. When the manipulation was detected and the assessee was confronted, he admitted to the additional income. The claim that 'surrender' during survey was on the assurance of the survey team that no penalty would be imposed, has not been substantiated at all and the matter has to be decided on merits as per law. In any case, the penalty has been imposed only on the amount of Rs.6,19,022/- which the assessee in his return has reduced from the income admitted during survey.
In view of the above, the provisions of explanation 1 to section 271(1)(c) are clearly applicable in this case. The assessee has offered an explanation which was found by the Assessing Officer to be false. Moreover, the explanation was not bona fide and the income admitted towards excess stock during survey was found to be reduced by indulging in manipulation, which the Assessing Officer detected. It was only thereafter, that the assessee admitted the undisclosed income. Therefore, the penalty imposed u/s 271(1)(c) deserves to be upheld. In the result, the appeal is dismissed.”
The assessee, being aggrieved, is in appeal before us.
Ld. AR for the assessee reiterated the submissions made before the authorities below and submitted that during the course of assessment proceedings, the assessee filed a reply dated 23.04.2008 stating that the assessee has not concealed any particulars of income. Ld. AR submitted that the assessee has surrendered the income of Rs30,00,000/- at the time of survey based on the working of the stock ; and later when he realized that few purchases bills remained unentered by the accountant of the assessee, then the surrendered income was genuinely corrected by the assessee and so, no fault can be attributed to the assessee for the negligence on the part of accountant.
He further submitted that though the left out bills of Rs,6,19,022/- were genuine, the assessee surrendered them just to buy mental peace and to avoid litigation and further on the basis of commitment of the department not to impose penalty at the time of survey and the claim was a bonafide claim supported by evidence which was corroborated by the parties and the said amount has been transacted through the banking channels. So the claim made by the assessee was genuine and so the assessee made a bonafide claim before the AO during assessment proceedings, so the penalty was not warranted.
Accordingly, the ld. AR pleaded that the order of the authorities below be set aside and the penalty levied be deleted.
On the other hand, the ld. DR relied on the orders of the authorities below and submitted that the assessee had concealed the particulars of the income and against the quantum proceedings also, the assessee had not filed any appeal against the addition before the CIT (A). He wants us not to interfere with the orders of the authorities below.
We have heard both the sides and perused the material on record. We find that the assessee is an individual and Proprietor of M/ s. Rahul Textiles and trading of cloth and related items. A survey was conducted u/s 133A of the Act on 11.02.2005. As a result of survey, excess stock was found and the assessee surrendered the excess stock amounting to Rs.30,00,000/- for taxation. The AO recorded the statement of the assessee to this effect during. the course of survey. But, while filing his return of income, the assessee offered surrendered income of Rs.23,80,978/- with a note below the trading and profit & loss account as under :-
“This surrender of Rs.30,00,000/- was made on the basis of Trading A/c drawn on that date from the figures taken from the books of account of the assessee. However, later on, the assessee noticed that their accountant missed to enter 5 purchases bills of Rs.6,19,022/- which material had already been received by the assessee till 10.02.2005. Accordingly excess stock surrender amount becomes at Rs.23,80,978/- (3000000-619022) and the same has been duly accounted for in the final accounts of the assessee."
The AO made inquiries from the two parties in respect of which the assessee had claimed the purchases of Rs.6,19,022/ - which were found not entered in the books of account of the assessee at the time of survey. The AO observed that in one of the cases, interpolation / correction were found in the bill produced for verification. However, both the parties submitted that the payment in respect of sales made were received subsequently through cheques. The AO confronted the assessee with the above interpolation in the bills and the assessee vide letter dated 13.11.2007 surrendered the amount of Rs.6,19,022/- i.e. the value of purchase bills as income which was deducted from the surrendered income of Rs.30,00,000/- at the time of filing the return of income. Accordingly, the AO made the addition on account of surrendered income of Rs.6,19,022/-. Against this addition, the assessee did not file any appeal.
7.1 As afore-stated, we find that the inquiries were made from the two parties (Geetha Dyeing & Finishing Mills and Navkar Knit Fabs) in respect of which the assessee had claimed the purchases of Rs.6,19,022/- which were found not entered in the books of account of the assessee at the time of survey. The bills of these two parties are found placed in the paper book from pages 38 to 42 is dated 19.01.2009, 04.02.2005, 05.02.2005, 07.02.2005 and 08.02.2005. According to AO, in one of the bills among the five bills produced for verification, he found interpolation/correction. We further find that however, both the parties submitted that the payments in respect of sales made were received subsequently through cheques and this fact in the words of the AO is reproduced as under :-
“Inquiries were made from the two parties in respect of which the assessee had claimed the purchases of Rs.6,19,022/ - which were found not entered in the books of account of the assessee at the time of survey. In one of the case, interpolation / correction were found in the bill produced for verification. However, both the parties submitted that the payment in respect of sales made were received subsequently through cheques. When confronted with above interpolation in the bills, the assessee vide letter dated 13.11.2007 surrendered the amount of Rs.6,19,022/- i.e. the value of purchase bills as income which was deducted from the surrendered income of Rs.30,00,000/- at the time of filing the return of income as mentioned above. Penalty proceedings u/s 271(1)(c) were also initiated for furnishing inaccurate particulars of income.”
Thus, we find that after taking confirmation from both the parties, the AO confronted the assessee with the purported interpolation in the bills and the assessee vide its letter dated 13.11.2007 surrendered the amount of Rs.6,19.022/- i.e. the value of purchase bills as income which was deducted from the surrendered income of Rs.30,00,000/- at the time of filing the return of income as mentioned above; and accordingly the AO initiated the penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income.
7.2 We have perused the five bills which are placed at pages 38 to 42 and they are dated 19.01.2009, 04.02.2005, 05.02.2005, 07.02.2005 and 08.02.2005. However, the AO has noted that out of the five bills submitted, one bill had interpolation which we could not see from a perusal of the said bills. Moreover, the fact that the AO has called for confirmation from both the parties who had issued the bills and they have confirmed the genuineness of the bills and said that they got the payments later through cheques. We find that though the AO has said that there was interpolation in one of the bills, he has not stated which bill was it. He could have clearly stated that out of the five bills, which bill has interpolation, given its invoice number, date, name of the firm etc, and which could have been confronted with the party whom he confronted to know the genuineness of the transaction, which he did not bother to do so in the first place, which exercise we feel, he should have done before penalizing the assessee. We find that the CIT(A) also did not appreciate the aforesaid facts which vitiate the factual finding of the AO that there was interpolation in one of the bills. Even if we take it for correct, the statement of the AO that one of the bills had interpolation, then also the amount in the said bill ought to have been the amount which could have attracted the penalty because it is only one among the five bills which is under dispute. Before us also, ld. AR vehemently submitted that there was no interpolation, which could not be contradicted by the ld. DR and when the fact remains that both the parties who issued the bills have confirmed the genuineness of all the five bills and the payments have been made through cheques, simply because the assessee surrendered the amount does not warrant penalty. In this factual background, the foundation on which the penalty is levied falls and for the aforesaid reasons and since we could not see any interpolation also in the said five bills amounting to Rs.6,19,022/-, we are inclined to delete the penalty levied against the assessee. We order accordingly 8. In the result, the appeal filed by the assessee is allowed.
Order pronounced in open court on this 30th day of November, 2015.